Taiwan Dollar Forwards Gain a Third Day Before Bernanke Speech

Taiwan dollar forwards rose for a third day on speculation Federal Reserve Chairman Ben S. Bernanke will signal the need to sustain stimulus policies that have spurred fund flows into emerging markets.

Bernanke is due to address Congress today and the Federal Open Market Committee is scheduled to release minutes of its last meeting. Fed Bank of St. Louis President James Bullard said yesterday the monetary authority should continue its bond-buying because it’s the best option to boost economic growth. The U.S. central bank has been purchasing $85 billion of debt a month. Overseas investors bought $179 million more of the island’s stocks than they sold today, taking inflows this year to $5.1 billion, exchange data show.

“There’s a bit of uncertainty before Bernanke speaks tonight,” said Suan Teck Kin, an economist at United Overseas Bank Ltd. (UOB) in Singapore. “There are some position adjustments that contributed to Taiwan dollar strengthening.”

One-month non-deliverable forwards for the Taiwan dollar advanced 0.1 percent to NT$29.835 versus the greenback as of 4:32 p.m. in Taipei, according to data compiled by Bloomberg. The contracts touched NT$29.765 yesterday, the strongest level since May 13.

The Taiwan dollar weakened 0.1 percent to NT$29.96 against its U.S. counterpart after being 0.5 percent stronger shortly before the close, based on prices from Taipei Forex Inc. The central bank has sold the currency in the runup to the close on most days in the past year, according to traders who asked not to be identified.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 18 basis points, or 0.18 percentage point, to 4.54 percent.

The yield on the 1.125 percent government bonds due March 2023 was little changed at 1.287 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.386 percent, according to the Taiwan Interbank Money Center.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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